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Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Stock

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Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Stock I Stock II Recession .30 .05 -.30 Normal 45 .22 .10 Irrational exuberance .25 .05 .50 The market risk premium is 6 percent and the risk-free rate is 2 percent. (Do not round intermediate calculations. Enter the standard deviations as a percent and round all answers to 2 decimal places, e.g., 32.16.) The standard deviation on Stock I's expected return is Stock I beta is percent, and the The standard deviation on Stock II's expected return is Therefore, based percent, and the Stock II beta is on the stock's systematic risk/beta, Stock is "riskier".

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